With the number of conflicting messages propagated about the UK’s mortgage and housing markets, it’s unsurprising that those who are yet to get onto the ladder have somewhat contradictory views on some of the biggest issues which impact upon them.
For example, a recent survey of 2,000 British citizens by Experience Invest highlighted that, quelle surprise, populist policies aimed at first-time buyers are ‘popular’ with them, without truly outlining just how inconsequential some of those policies might be in actually allowing them to get onto the housing ladder.
Indeed, if you read the thoughts of some housing market stakeholders some of the policies put forward might be hugely counter-productive and not just damage the chances of purchasing a property, but fundamentally undermine the UK housing market.
Take stamp duty, for instance. Two-thirds of those polled want stamp duty scrapped for all first-time buyers, despite the fact that the vast majority of first-timers don’t actually pay any stamp duty anyway, since the threshold for payment was raised to £300k properties.
However, I’m aware that in certain parts of the country – London being the most obvious – first-timers tend to pay more than £300k for their first property. And yet, that being the case, a saving of a few thousand pounds is probably not going to significantly increase the number of first-timers purchasing.
Why? Well, as many have pointed out, stamp duty holidays or cuts only tend to help those who were already planning to buy and had the money to do so. The biggest barrier to any first-time buyer getting on the ladder is still the raising of the deposit, and if you’re buying in expensive areas, a few thousand pound saving probably doesn’t get you to where you want to be.
In other words, stamp duty cuts don’t act as a sizeable catalyst for those who weren’t planning to buy, they just allow those who were always going to purchase to save some money.
Where potential first-timers might like support is in terms of the rents they have to pay. It’s certainly the case that for many people saving for a deposit is incredibly difficult, given the level of rent they have to pay and the proportion this is of their monthly wage. Therefore, once again understandably, when it was put to the research respondents that they might like the Government to introduce a cap on rental prices ‘to make it easier for renters to save for a house deposit’, the overwhelming majority (68%) agreed.
Rent caps are incredibly controversial however and there are some notable critics within our own industry – notably Bob Young at Fleet Mortgages – who argue that the introduction of such caps will have an overwhelmingly negative impact on the private rental sector. And there is precedent for this – in the mid-1970s a Rent Act was introduced which did just this and it resulted in huge numbers of private landlords leaving the sector, which led to a lack of supply, which ultimately hits those who have to, or want to, live in rental accommodation.
Now, I accept there’s an argument to suggest this won’t happen again, but we must also consider the reliance that the UK housing market currently has on PRS supply. It might not be the chosen method of housing provision for some but we are where we are, and private landlords have already been hit pretty hard by a range of regulatory and taxation changes which effectively make their investment in property less profitable.
The ability to change rents is one of the few ways they have to maintain their investment, to pay for the lost tax relief for example, or to cover higher maintenance costs, or to ensure they can pay higher letting agent fees, etc. I’m not suggesting that anyone’s heart should bleed for landlords but the introduction of a rental cap effectively takes away that mechanism, and I suspect it could be the last straw for many landlords. Part of me thinks the market should be left to do its thing in the private rental sector but many politicians think otherwise.
So, while policies which hit landlords or seemingly help first-timers are always going to be warmly applauded, policymakers should really be considering whether they will make any material difference, or indeed whether some unforeseen circumstances will do more damage.
In my view, the fundamentals of improving the first-timers’ lot are simple – we need more affordable housing supply and we need to ensure that there are affordable mortgages available to those with smaller deposits. Solving those issues could have a real and tangible benefit to first-timers – other populist policies might just be another red herring and I suspect all those trying to get on the ladder have had enough of them.
Pad Bamford is business development director at AmTrust Mortgage & Credit